Marketplaces: winner takes all, category approaching saturation

This deck on marketplaces from SVB gives a great breakdown on the category.

One of the big takeaways is the extent of the winner takes all dynamics. Due to the network effects at play in marketplaces you would expect the leaders to be worth considerably more than the followers, but the analysis on slide 10 shows that it’s a surprising 10x+.

The other takeaway is that the marketplace category is approaching saturation. You can see that from slide 11 which shows that an increasing percentage of marketplace investments are in B and C rounds, and slide 12 which shows that over $2bn has been invested in transportation marketplaces and nearly $1bn each in food delivery, financial and hospitality. The opportunity now lies in the less obvious and more niche markets. The opportunity can still be large, but not Uber scale…

In the Uber and Lyft model, however, the friction for supply of drivers to belong to multiple services is low (and we see it now). Similarly, the friction for the demand of riders to use multiple services is low (many can install both apps seamlessly and see who has the lowest wait time). So when this friction is lower, does winner take all dynamic occur? Surely Uber has a huge lead but that is due to expansion into geographies rather than capturing all the demand in a single geography

Hi Rich – that’s a good point. Up until now switching costs have been high enough that the leader has been much bigger than the followers, but as the friction in switching comes down and the market is large enough to have at least two liquid pools of supply and demand that might change. The platform becomes commoditised.